| 8.8°C Dublin

Hopes rise for mortgage rate cuts to boost our economy

HOPES of mortgage rate cuts rose today as pressure increased for immediate action to boost embattled eurozone economies.

Hard-pressed homeowners struggling to pay bills may soon benefit from the first of a series of mortgage cuts being urged on the European Central Bank.

Influential international bodies declared sharp interest-rate reductions were "urgently needed" to give a new lease of life to economies throughout Europe as a slide back into recession loomed.

The influential Organisation for Economic Cooperation and Development (OECD) warned the euro crisis was rapidly worsening throughout the region. It demanded substantial loan rate reductions.

Earlier this month, the ECB reversed its previous policy and cut interest rates to 1.25pc. A series of further cuts are now believed to be on the way.

Four cuts, including the most recent one, would reduce repayments on a €200,000 tracker mortgage by €120 a month. Up to 400,000 homeowners in Ireland will benefit from the expected cuts.


It is believed the first cut will come next month followed by another cut in the first weeks of the New Year. Further decreases in February or March are also likely.

An OECD report declared the euro itself was now in danger and action was necessary.

Lower interest rates and more intervention in markets by the European Central Bank could kick-start consumer spending and restore confidence.

The OECD wants the ECB to do more to end the crisis, before it is too late.

Over a year, a series of mortgage cuts would mean householders on a €200,000 tracker mortgage would be €1,440 better off. That would go some way to balance out the the €3.8bn tax and spending hits in the Budget.

While 400,000 tracker mortgages payers would automatically benefit from rate reductions, banks are not obliged to pass on rate cuts to those on variable rates.

Goodbody economist Dermot O'Leary said ECB rates could fall as low as 0.5pc, which would imply another three cuts. Alan McQuaid of Bloxham Stockbrokers said there was a 50/50 chance of a cut in eurozone rates next week.